Annual Report 2019

MANAGEMENT DISCUSSION AND ANALYSIS 14 The United Laboratories International Holdings Limited Annual Report 2019 Liquidity and Financial Resources As at 31 December 2019, the Group had pledged bank deposits and cash and bank balances amounting to approximately RMB3,889.8 million (2018: RMB2,134.3 million). As at 31 December 2019, the Group had interest-bearing borrowings and bank overdraft of approximately RMB3,988.0 million (2018: RMB3,305.6 million), which were denominated in Hong Kong dollars, Renminbi, Euro and United States dollars with maturity within five years. Borrowings of approximately RMB2,057.2 million are fixed rates loans while the remaining balance of approximately RMB1,930.8 million is at floating rates. The directors expect that all such borrowings will either be repaid by internally generated funds or rolled over upon maturity and will continue to provide funding to the Group’s operations. As at 31 December 2019, current assets of the Group amounted to approximately RMB8,713.5 million (2018: RMB6,697.0 million). Net current assets increased from RMB181.8 million at 31 December 2018 to RMB2,254.7 million as at 31 December 2019. The Group’s current ratio was approximately 1.35 as at 31 December 2019, as compared with 1.03 as at 31 December 2018. The short term financial position has improved significantly. As at 31 December 2019, the Group had total assets of approximately RMB15,699.7 million (2018: RMB14,602.3 million) and total liabilities of approximately RMB9,027.9 million (2018: RMB8,480.3 million), representing a net gearing ratio (calculated as total borrowings, bank overdraft, bills payables, obligations under finance leases and convertible bonds less other pledged deposits, pledged bank deposits, and cash and bank balances to total equity) of 36.41% as at 31 December 2019, as compared with 49.75% as at 31 December 2018. Currency Exchange Exposures The Group’s purchases and sales are mainly denominated in Renminbi, United States dollars and Hong Kong dollars. The operating expenses of the Group are mainly denominated in Renminbi and Hong Kong dollars. The Group’s borrowings are denominated in Hong Kong dollars, Renminbi, Euro and United States dollars. The Group’s treasury policy is in place to monitor and manage its exposure to fluctuation in exchange rates. Besides, the Group will conduct periodic review of its exposure to foreign exchange risk and may use financial instrument for hedging purpose when considered appropriate. Contingent Liabilities As at 31 December 2019 and 2018, the Group had no material contingent liabilities.